Bitcoin (BTC) Price Drop Might Be Telling Us Something: Here’s Why

Bitcoin has experienced a decline of 15% in the third quarter of 2023, despite the approaching approval of U.S. spot ETFs and a thriving stock market. Bloomberg strategist Mike McGlone offers insights into what this recent weakness in Bitcoin prices may signify.

In his analysis, McGlone suggests that Bitcoin could be acting as a leading indicator for a potential significant economic reset. He points to the cryptocurrency’s dramatic rise and subsequent fall in liquidity, indicating that recessions tend to coincide with declining risk assets and easing from central banks.

McGlone argues that cryptocurrencies emerged during an unprecedented era of zero-interest-rate policies. As this trend reverses, it may have significant effects on asset prices, suggesting that digital currencies like Bitcoin could reverse in value as interest rates rise.

He noted that Bitcoin’s current weakness might reflect a natural response to rapidly increasing interest rates. To illustrate this, he mentioned that Federal Funds futures are projected to be around 5.45% in November, a stark contrast to the average of 0.6% between 2011 and 2021, a period during which Bitcoin surged from $1 to nearly $69,000. It’s important to recall that Bitcoin reached an all-time high of almost $69,000 in November 2021.

On the potential future direction of Bitcoin prices, McGlone referenced the price behavior prior to the extraordinary liquidity surge of 2020-2021 when Bitcoin stabilized around the $10,000 mark. He indicated that there could be downward risks leaning toward this price level, suggesting a consolidation phase may occur before any upward movement.

According to McGlone, “Bitcoin may need to exhibit relative strength for us to focus on the broader picture of limited supply and increased adoption of the digital asset.”

Following the SEC’s decision to postpone all spot ETF rulings until October, Bitcoin’s trading activity has been relatively stagnant and continues to exhibit this trend. At the moment, Bitcoin, the largest cryptocurrency by market capitalization, has seen a slight increase of 0.20% in the last 24 hours, trading at $25,682.